>> that's what we scheduled. every briefly what do we hope to accomplish? simply put, we want many more people engaged in understanding the nation's fiscal crisis inside and outside of washington. we want the average american and especially young people to better understand what is at

stake for them if we don't get this right. these are not table stakes. this is what we do or don't do will affect this country for a long time in the future. we want immediate to hold us accountable and ask tough questions and follow-up questions when their plans flunked basic arithmetic. we want to strengthen and add to the group of senators and members of the house on both parties were willing to work together about putting the country's future before their political party. we want the federal office to explain how they will work with others to solve this crisis rather than playing let's pretend. our leaders in washington can no longer answer the question of what is two plus two with another question. what do you want it to be. on fiscal matters both parties have a robust political strategy, no doubt about that, but america's future requires a governing strategy. all of this is essential if we're going to succeed in

strengthening america and protecting our children's future. over to you, pete. >> thank you very much. i believe for all the members are present at the podium, join me in thanking you for what you've done to bring this forum to this point, and as we listen to you, feel certain that we'll get where we want to go. i'm pleased to be the cochairperson and he asked if i would do it, and, obviously, many of you know i have been working for so long that many people are wondering which will get sold first. we solved the budget and will senator domenici finally this? i don't know which will be first but until i leave you i will continue to work on this and see what we can do. so thank you, sam. literally millions of words have been spent on this topic during

the past two years. when you and i, senator negron were still innocent we heard our colleagues under millions of words on the need for fiscal wisdom. you are not and are then colleagues work together to forge budgets to try to balance government spending with revenues. we had colleagues on the left and the right, we expect, except for a handful of their extreme were partners in our work. even after your retirement, senator, congress and president work together despite partisan rancor that may been there in their prior life. indeed, after negotiations between president clinton and congress we were able to create more consecutive years of balanced budgets. many watching this event today may forget the drama, the tension surrounding these negotiations. we had our ideologues then, just like now. however, we put together a

coalition. i call it a coalition of the courageous. what we face now is more dangerous than what we faced 10, 20, 30 years ago. but we see policymakers refuse to cooperate. still a american all the time in the world to solve this fiscal problem. if we do not address the debt starting now, we risk suffering an economic emergency. we risk turning our great land into a poor country. although i was not old enough to appreciate the dangers that america faced in world war ii, i know that our very existence was at stake. i believe that our existence as a powerful nation able to uphold the values that we hold dear is threatened today. it is not some foreign car that threatens us, but it's our own -- foreign power, necessary to curb our debt that all observers

and analysts worth listening to and policymakers call unsustainable. debt is not something that we see on a daily basis. we don't think about as we watch a football game or the nfl, or take our children to school or go support the nationals as a new, wonderful team here in town. it is a silent killer, slowly eating away at our society. it is easy to ignore. too many people are fooled by today's historic lilo interest rates. those rates are low to quote a market analyst, because america is the least rundown house in the terrible neighborhood. global investors put safety and preservation of capital first in this dangerous world. our debt, although it is huge come is considered relatively

safe for now. the federal reserve is the buyer of last resort. the global economy we, low interest rates on our debt are inevitable. not that won't last forever. at some point markets will demand that americans being paid a competitive rate for its debt. indeed, if historical rates, the ten-year note with a the situation now, within a decade interest payments on our debt would exceed every dollar we spend on national security, every dollar. the debt is not a republican debt. it is not a democrat debt, and there's no use in one party blamed the other for the debt. it is an american debt as it approaches this particular time in this countries life. the only solution to this an american solution. one where leaders of both

parties band together for a better future in defiance of polarized ideologies that dominate today. let me stress quickly three things. first, the time to act prudently has come. indeed, has been there for some time. second, delayed merely means that measures that are long-term that can be phased in with only a little pain will become short-term and cause great disruption and pain. for example, our health care spending continues to dominate out of control spending, and perhaps we could show that on the ground. show the particular one. you see it. can you see spending where it is going? the blue line. it is going up, up, and away. that's what we now. we can reform the systems now and face in reasonable changes,

or we can be faced with a slice like greece were benefits need to be slashed overnight. third, policymakers have to admit that they have made promises they cannot keep. made with good intentions, yes, but given america's demographics, it cannot be kept. it cannot keep health care promises we have made in exactly the form that we have made them. we cannot keep a tax system that we have promised. we cannot create programs that attempt to solve every ill that mankind is era to, and senator nunn, the third point may be the key. policymakers have fumbled around, and fumbled around this issue again and again for years. and now because none of them want to admit that they've made promises they cannot keep. it is easier to be ideologically

arrogant than it is to be realistically humble your our leaders still have the opportunity to write the fiscal ship. it will take cooperation and decisive met but the excuse that politics are tough and tougher today than in our time simply won't wash. every generation has had that excuse. vietnam, watergate, rights industry, recessions, foreign aggression, wars. we're here today to challenge our policymakers to face up to this challenge and restore the economic strength of this nation. there is no way out. in closing, it can be done. thank you. >> thank you very much, pete. [applause] >> are we going to do this in alphabetical order given that there is seniority involved, and

always sensitivities between the upper house and the lower house. so bill brock. >> much of my time since leaving government has been in the cause of education reform. in 1983, some really good folks published a report called a nation at risk. the urgency of reform in our educational system. it's been 30 years since we've had that report on our desk. and precious little has been done in many cases we are at least as bad off as we were. we are now in a fiscal world was is a nation at risk. and we don't have the luxury waiting for another 30 years. but it is just stunning to me to

see moody's the last couple days say there in the process of thinking about downgrading u.s. debt, as is featured. unbelievable that the debt of the united states could be at risk. but there you have it. it's a big deal. and there is no particular magic wand. the truth is with elected leaders who have been unwilling to tell us we have to pay for what we ask for. so we haven't done it. the debt is now burdening our economy, our growth, our job creation. and, frankly, even our attitudes. it creates a coloration of the whole climate that says, don't take risks. you already own too much. you slow down in that regard, you slow down the ability to solve the problem. that's why we are today. a couple rules. as we begin this conversation to

shift from a problem approach to solution approach. first of all, let's try to get our latest essay there are no quick fixes to that, and there are no absolutes, let's stop the exercise of saying i will never, i will never support a tax increase, i will never support a tax on social security or entitlements. all that does is delay the honesty, the ability to work together. we have to do what we have to do to fix the problem that we created. that's the bottom line. so i guess where i like to end up, if the american people have not been told the truth, there can be no higher responsibility for us as leaders, or those who

are candidates, to inform them as to the degree of risk they and their children faced. that simply means we've got to have any campaign's when we're asking for people's votes, a willingness to say i can't do it without the other side. we can't keep saying i'm not going to talk about this until they talk about that. you have to be in the same room at the same table, both if you saying the country has a problem. and until we do we will be tragically a nation at risk. >> thank you, bill. byron dorgan. >> thank you very much. and let me thank sam, you indeed as well for your leadership. i'm here to support this effort because i think we are lost in a long dark tunnel of fiscal policy trouble, and i think it's a danger to the future of this

country. we know we have a crushing debt that is growing and is unsustainable, and we know that that exists at the same time as we have a weak economy struggling to find its footing. there's an urgency i think to some of the will and importantly the wisdom to try to to do with both of the circumstances at the same time. the dilemma is that some will tell us that the solution for weak economy is completely and inevitably at odds with the solutions to the fiscal policy back on track. i understand the teaching of economics, todd so myself in college, but i believe we can do both and must do both for the future of the country. the solutions are obviously not painless. they are painful, but it just seems to me that a plan that asked americans to be part of something bigger than itself, a plan that would give them some confidence about the future for themselves and their kids is a plan they will embrace.

it's also the case in an era of rancid partisanship, perhaps more than any of us who serve through a long while in congress, have ever seen, some would say it is just not possible to reach compromise and set the country on the right course through political compromise to i don't agree with that either. i think a history, a couple hundred years of history of this country is sprinkled with examples of leadership and compromise and courage and character that have sprouted throughout the country at exactly the right moments by people who put the country's future ahead of their own future. and i believe that will and can be the case today. but it needs to be nudged, and that's what, probably pushed as a better example go and that's what this effort is all about. and i very much appreciate the work that is being done by this group. >> thank you, byron.

bill frenzel. >> thank you, senator. i'm delighted to be here as part of senators nunn and domenici's program, particularly glad to be with some folks of my own age for a change. [laughter] >> some of them. >> i do want to say that the problem as it has been laid out israel. and the two senators i think have given us a pretty complete picture of what we faced and how we have to face up to it. i can't embellish that at all. i only note that we're in an election contest now, none of the parties nor the candidates at any level are probably going to engage in the discourse that we think that's necessary to lead to a solution until after the election. however, after the election we

have to have some progress in the lame duck session before the cliff of the end of december. the american public has not grasped the urgency of the situation. congress, understanding that the end may not come tomorrow, it may come the day after, is content to wait until it comes. there is a time, and the american people are not want to stand up and be the first in line to make sacrifices. that's normal, but normally they are willing to follow good leadership. it is now time for our elected leaders and those who will be elected to stand up and lead. and that's going to a choir compromised. it's going to require give on an entitlements, tax, defense, all of the elements of the budget have to be involved.

we all know the gender framework but somebody has to negotiate it and that's up to our elected leaders. we're going to try to nag them until they do. thank you. >> thank you very much, bill. representative and secretary dan glickman. >> thank you sam, and thanks to you and my colleague at the bipartisan policy center, pete domenici, for your leadership. it's tough enough in the country to make simple decisions, built on separation of powers. the founding fathers 11-foot on the brake and one foot on the accelerate at all time, and we've got another breaks are burning. it's tough enough, but in that environment coupled with this campaign and firemen, money and the political system 24 hour media cycle, nobody seems to be free to make decisions. incentives for leadership are really pretty difficult. but it's not all bleak.

it always struck me that when you look at great institutions that work well from great companies and academic institutions, there's a kind of symbol of a high-performance team, teamwork is part of make it is institutions work. so you look at fortune 500 companies, you look at auburn the startups can look at academics, you look at labor unions, ngos. the ones that work are based on teamwork from the top down. they are part of a team. a work together. we have great trouble in our country now being 18, a high-performance team. and i think that makes it much more difficult for us to address these very serious problems with the deeply, deeply controversial political solutions. i think we can make them. it doesn't take rocket science to know what we're doing, but hopefully after the election we will go back to a system of teamwork. we did that in the second world war. we did that and the depression.

we've always done it with a great compromise. that teamwork has to be led by president who, he is the ceo of this teamwork, the team so to speak, although there's no absolute perilous to a corporate environment. the president sets the policy and sets the agenda. and it requires people to follow along and to work together. i honestly do believe that these concepts of teamwork and the principles of social institutions are just as african will of government as they are the private sector and nonprofit sector. we just haven't seen them working very well because of the disincentives and pediments i've talked about before. as byron dorgan talked about the need for character and compromise, but a note to get that you've got to make sure people believe we are all in this boat together. there's got to be leadership at all levels and it really has to start with the ceo of the country, the president. and it's not easy because of the political and five at we're in

what someone would defeat the ceo of under any circumstances. but the truth of the matter is if the ceo is successful in bringing people together, and folks are successful in working with him then we can tackle these problems which are not insurmountable at all. so i'm hopeful that in the postelection if i did with a nagging that bill frenzel was talking about we will be able to look at this as a problem where we are all in this together, with the country sinks or swims because of working together, and would begin to operate more like a high-performance team. thanthank you very much. >> thank you very much. our next speaker is j. bennett johnston, democrat from louisiana. i don't know if we're telling everybody where these members are from, but i thought i must tell them where you're from because you look so different from when you were here. i want to make sure they remember you. >> thank you pete.

unless the congress acts in the lame duck, as we all know, we've off the fiscal cliff out and probably into recession. so there is groth -- broad agreement among us, and i think officially among both parties that we need a grand bargain. my concern is that in the lame duck, by trying to do too much, by trying to get a grand bargain, which is virtually impossible in the lame duck, that we go into gridlock and then we go off the fiscal cliff. what can we do? now, there's a lot of sentiment for what they call a credible down tank. that is a reduction in the deficit, not all the way to the grand bargain, but partially. i think that's a fools errand. it's going to be just as hard to

get a virtual, credible down payment as is to get a grand bargain for all of these things are interrelated, taxes, deficit reduction, in reduction. and each party says we won't give you that unless you give us this, and they are all interrelated and there's not time for, in my judgment, a credible down payment. what we can do, what the congress can do in a lame duck, in my judgment, is two things. first, agree on the size of the deficit reduction. in my judgment, simpson-bowles had it about right at $4 trillion over nine or 10 years with 2 trillion in tax, 1 trillion in taxes, 1 trillion in interest savings. secondly, they need to provide for some kind of matrix with

time horizons, milestones, so that for example, say by march the first you must have reconciliation instructions to the committees telling them how much they have to save in each category, and that must be passed by march 1. failing to meet that, then you go back to some kind of sequestration. and have milestones to out the rest of the year, because the grand bargain is going to take the greater part of the year. i mean, let's face it, you cannot reform the tax code, you cannot do these things rapidly in a lame duck. now, in my judgment we could be very useful in outlining and trying to get agreement on those two goals. that is, the size of the reduction and the mechanism by

which the congress goes into next years, and the enforcement mechanism. because remember, congress is going to insist on some sort of failsafe, so that if the congress doesn't act, that something will happen like a sequestration. i hope we can get together on that kind of program. >> thank you, bennett. tim roemer, democrat, indiana, and also ambassador to india. >> thank you, senator. think you for the leadership from all the senators and representatives of on the panel. thanks to the think tanks who has helped organize this event. i'd like to point out a couple things that happen on the last 24 hours, point out two or three trends and then talk about why, with what america faces globally in the world today is essential for us to have our fiscal house

in order so that america projects its power efficiently and effectively and powerfully in the next century. first of all, in the last 24 hours we have tragically lost a united states ambassador in libya, and on the front page of the financial times this morning, the headline reads that now moody's might join the s&p as downgrading the united states good credit ratings. excellent credit ratings. both of those project serious threats to the united states. one, how do we continued our diplomatic efforts, our military and economic efforts abroad to export, to engage the world, to explain american values, and make sure our people are safe overseas. and, to come how do we protect that great credit rating of made

in the u.s.a. i am an optimist. i believe that we can achieve these outcomes. the cairo book that many people are reading this past summer talks about great leadership, but it also quotes walter lippman and james reston talking about the worst congress they have ever seen in terms of the gridlock. and we overcame that. just as i am optimistic we will overcome gridlock on capitol hill that we see today. two ways around that are great leadership, bipartisan leadership, democrats and republicans working together as they did 15 years ago for a balanced budget in 1997. and secondly, with tweets, with blogs, with social media, the american people have to wait in. they have to come forward and

say, when you take deficit reduction action, good things happen in america. not only for our children, for our businesses to project forward, get what they can do for exports going overseas, for the tax code, good things happen to get our economy moving forward. let me just conclude by saying in terms of the optimism that i talk about, harry truman once said this, and i quote, no government is perfect. one of the chief virtues of a democracy, however, is that its defects are always visible, and under democratic process can be pointed out and corrected, unquote. we can point out these defects, and we can with optimism and bipartisan correct these and move forward.

we will project american power in the century ahead, and i'm very optimistic the united states of america's best years are ahead of us. take you very much. >> thank you very much, tim. and our final member today is john tanner, and we'll have a few questions from the audience. i think beginning at 10:30 we will go straight to jim baker and to bob rubin. john, wrap us up. john is a democrat from tennessee. >> thank you very much, mr. chairman, and thank csis, concord coalition and also participated in this. i intend to be brief but with my accent it may take a while. [laughter] i've been on a lot of panels and i do know that either been on one where i agreed with every word that's been said so far, and i hope you do, too. these people have devoted a lot

of thought and effort to what we're doing here today, and i hope that everyone takes it as seriously as we possibly can. i want to talk a little different. 50 years ago this year there was a case in united states supreme court from my old congressional district, tennessee, called baker versus car. in that case the first time in modern political history the judiciary said that and a portion seats based on population was a just about issue. it involved equal protection and all the rest of it. and that from that game the system that we have today. that system today is where the state legislatures, politicians, draw districts were state house, states senate, and united states house of representatives seats. after, i don't know about this last census, but for the last 10 years we've been talking about

it. we had a bill in congress of course went nowhere. but what has happened to us over this time is that we have impose inadvertently, and i think unintentionally a parliamentary system on a representative form of government. it doesn't work. in parliament, you know, you only have the two branches and yet the government and opposition. the government decides something, it happens. they suffer, as one of my friends in the uk parliament said, they suffer up to five years at a time under the tyranny of the majority. our forefathers intentionally did not want that system, and set up a three branch system. not only does our system encourage compromise, it forces it if our government is to work. our problem with the debt and deficit is not so much mathematics, although certainly that's part of it. is the political will to do something about it. and the way members come there

after the 2000 census there were only 91 seats left in the united states house of representatives that would even within the hypothetical margin of error of a 50/50 voting pattern. which means over 300 members are being collected in the party primaries with the most partisan elements of our society reside, and that's why we wonder why we have this polarization that is killing our ability in the congress to really reach conclusions that are sane, sensible, mostly centrist oriented so that everybody can at least live with it, if not embraced and endorsed it. we only talk about this every 10 years, but it affects us every day. i hope you'll give it some consideration, and i would just conclude by saying either we fix our problem or our children's future is bleak.

>> the good news is we can do we have the political will. they cut me off flashbacks. thank you, mr. chairman. >> thank you, john. i don't know why but i understood every word you said. [laughter] i agree. i think we've got a little time here now between now and 1030. i don't know that i've had exactly the right time, i'm going to ask one of my folks to make sure we cut off a minute or two and make sure we get to satellite. so we'll have questions if anybody has any from the audience. >> thank you all for being here. my name is corey and i'm a graduate student at the george washington university, andhe question that i have is really about the approach we actually

should be taken through bipartisanship, i mean that in a sense, shouldn't be looking at the ideas put forth off by the democrats and republicans and try to find compromise within those ideas? or should we be trying to find and circulate new ideas that we haven't tried it and haven't even talked about yet? if so, how do we get those ideas circulating? >> my view is we've had two startling blue ribbon groups of people, the simpson-bowles and the domenici-rivlin who have worked on this exact problem. so our group is not here to reinvent the wheel. those to me are the press -- best framework to work from. but within those frameworks there are a lot of unanswered questions. i don't think anyone has a precise exact answer of how you deal with the escalating health care costs. this is a governmental problem of order of first magnitude but it's also a solvable problem beyond the government. it affects every business in the

country and affects patients around the couch. it affects the whole group of providers. so the ideas and the health care and entitlement area of how we fairly begin to been the line, the trajectory, is their all important also i don't think anybody's got perfect solutions to the tax. it's a very complex complicated. i think most people would agree that we would be better off than we could throw the whole code out and start over, but boy, that's hard to do. so ideas along that line are enormously important, but the main thing i think that this group are like to see around the country is young people, and, indeed, all of us, getting involved in trying to encourage people in office and those running for office to entertain and listen occasionally to other people, and to entertain the possibility they may not be completely correct on everything. and so if we don't listen to each other it's going to be very hard getting any kind of grim. so that would be a role i think particularly our young people

could really play, as was a whole electorate. other people may have answers. tim at the? >> i'll give it a try. let me just say to you, in the two proposals that have been alluded to, if you shake it, outcomes a very simple proposition, that in order to solve the debt problem, at least this is one of the solutions, you have to reform entitlements not to affect their current recipients. because remember, entitlements don't need to be worked on for eight, 10, 12 years. you can put them on a small line like this, barely had any impact. but none backward. you go along with four before anybody is impacted but you got to decide, go in a room and talk about that. this group that i worked with,

democrats and republicans, said you cannot get enough out of that and other cuts to solve these problems to take a look at the revenue side. and in both cases these two groups said total reform the tax code and direct your attention at the hundreds of tax expenditures worth trillions of dollars and decide which, for all of which could be changed, removed, repealed. and what you get from that apply to both the debt and, to the debt and to the budget. it turns out that we have never yet had a bipartisan group with authority looking at those two in a package to see what they could tell the american people the negatives are. we just generalized the

negatives. if you once sat down and looked at them in detail and got them outcome i believe with leadership you have the beginnings of a solution. you don't need to find new solutions. there are very few new ones, in my opinion. they are real. they are there. everybody knows them. thank you. >> tim roemer? >> i would agree. there are a plethora of ways to balance the budget. commissions, the president has put a proposal out, lots of ideas. i would argue two points to build support for the deficit. one, i've been working with the next generation group of young people at college campuses that have been trying to put a forum together for the presidential candidates, and as you probably know, you look pretty young, a lot younger than all of us up on this panel, the two biggest issues to college graduates and

college enrollees right now our college costs, tuition and debt, and the deficit. national deficit. so they need to weigh into this. and secondly, again, reading this caro book, lyndon baines johnson put a coalition of civil rights together that was not just church groups. it wasn't just african-americans and religious groups. he worked with business leaders. he worked with labor leaders. he formed coalitions. congress worked, democratic and republican leadership together, to get civil rights and voting rights and bills done with push up from the american people and demonstrations. so i think a lot of this has to come from americans. leadership comes both ways. it comes from people in washington and it comes from you. >> bennett? >> sam, i'd like to see us, i'd

like to see us sponsor a grover norquist type pledge. only i'd like to see our pledge say that i pledge to work on a bipartisan basis to seek a grand bargain with everything on the table, and put it out there and see who refuses to sign that. >> thank you very much, bennett. is that the way you do it in louisiana? [laughter] >> thank you very much. bill brock. >> it's wonderful how may people of your don't have an accent. [laughter] two or three things. first, i pretty much agree with bennett. kim says we've got a plethora of ways. the first commitment we have to make is to come as bennett said earlier, go big. goes welcome have the same component and same problem. if you're going to do it, do it and do it anyway that receives the kind of support you need and

gets to problems. new ideas, there's some new ideas out on the table. consumption tax is being discussed in this country, but it's worth talking under the solutions. size, composition and enforcement are sort of the three essentials to make, because if you don't have adequate size, if you don't have the right composition, and if you don't have and enforcement process, you don't have, for all of us as citizens, as investors, you don't have the assurance that we're going to have to have, that we're going to deal with this problem. if you don't solve that problem, if you keep using quick fixes, you are dead. you can't get from here to there. there aren't any quick fixes. it's a long-term problem with a long-term solution and is going to take time to work through it. >> vibrant? >> sam, just to underscore the

need for bipartisanship exists in order to do big things, bill frenzel and i were on the ways and means committee in 1986 when we wrote the last major tax reform legislation. it was proposed by a republican president, ronald reagan, introduction of legislation by bill bradley and dick gephardt pick in the actual markup we occasionally had the their active participation of the treasury secretary jim baker and dick darman and others. it truly was a bipartisan effort, and it worked. but i want to describe it on to say that reform the tax code is very, very, very difficult, even under circumstances where there is substantial bipartisanship. i think it's urgent that we do that now. i know it can't be done into next year. i don't even know if it can be done in a year, that i know it cannot be done without very substantial bipartisanship. this is very difficult to do, and if there is bipartisanship,

it is doable. >> thank you byron. dan? >> just to point to your question, it strikes me over the last 20 or 30 years the american people have been beaten down by the fact that government is bad, doesn't work, it's filled with corruption. it is wasteful. [inaudible] this country is kept itself safe from terrorism, through security force, through the best military of the world. you know, we are all, i go back to the point about we are all in this together. we have kind of come out of this world but we are all in this together and we have this little piece, save social security but to hell with everything else. say farm programs, to hell with everything else. somehow we've got to go back to try to build confidence in the american people that even with all the defects our political system is good. what our government does his job beneficial. it's a positive experience to where the strongest nation in

war because of that, and then it will i think build support from the american people that a grand compromise is a positive thing. >> mr. chairman, could i comment for a minute? we're about to go into the next session will have to distinguished witnesses but i would like to share with every members of the panel and the public, there's one thing that has to happen as we put together, as a nation, the solution. and that is we've got to remember this. we are not growing our gross domestic product is not growing sufficient, or sufficiently to take care of the expected needs of our people. if the gdp, it grows a certain amount each year, and that permits more things to be done by more people that costs money, and ours is not growing enough. so whatever we put together must be as best you can do, a growth oriented budget, or we won't

have the tools to solve the problem. the tools are that we get richer annually rather than for. that means we grow rather than not grow, as it has been occurring now. that is a must in whatever package we put together. >> i agree. and one thing, we're going to people from american business conference testify later about that very point of how do you grow? these are the medium-size compass of america. i think our time is just right to turn to robert rubin who is coming, to the podium. bob, we hate to isolate you there. your buddy, jim baker, is coming in on satellite, and let's create bob rubin and jim baker -- let's greet bob rubin and jim baker. [applause] >> jim, we're glad to have you.

bob, people give you a proper introduction. we'll start with jim and they would turn to bob rubin and then have a few questions. >> wow, this is -- jim, this is exactly why i agreed to work with sam because i knew i would get that one opportunity to introduce my great friend. so you are here today, and we look forward to hearing from you. there should be no doubt in this room that this gentleman who is before us is one of the most distinguished americans that have ever lived, and we are fortunate that he and his associates have both agreed, coming to us with distinguished records, to help us in our mission to make america strong again, and to make our economy strong again. this man has received more honors, including this distinguished medal of honor, than any living human being could fit in their major room when they put up the awards that

are so many. and i want to say that i served with him, and i know firsthand what a wonderful leader he is, how fair he is and how tough he is. he claimed his toughness at -- as an executive branch member because he once was a u.s. marine. i told him he was a softy, but he insisted that i should tell no one how i made so many pieces of legislation work when i worked with him. but the important thing is, he knows plenty about america and america's problems, and the world and america's problems in the world. so he will be our first speaker. join me in welcoming james a. baker. [applause] >> thank you, pete. [inaudible] >> we can't hear.

>> you can't hear me? >> hold on just a second, jim. we've got to get the volume up to i'm hearing you okay. but i'm getting a feedback. >> it's still feeding back. do you guys want them to go to the other speaker? >> maybe we should go with -- >> pete, can you hear now? >> that's better spent go ahead, jim. i think we hear you now.

>> can you that? >> yes. that's loud and clear. >> okay, great. let me say -- i'm still getting the feedback in my earpiece here though, but let me say that i appreciate that over the top introduction that pete domenici gave me, and i'm delighted to be here with you, pete, and with sam and with others with whom i've worked through the years. and particularly did like to associate myself with the efforts you have here in order to bring some sanity to our fiscal problem. let me say at the outset that i remain proud of the economic policies of the reagan administration, which i think lay the groundwork for a record 24 out of 25 years of real gdp growth, beginning in 1983.

i heard, i guess it was byron dorgan's comments about tax reform. i think, i think what we're able to do in 1986 with tax reform, with a republican president was significant, because that proposal was passed really with democratic votes. and it was a lot of cooperation from both sides of the aisle. the same thing happened of course in 1983 when we fixed social security's financial problems for a while, by giving, by taking it out of the political debate, taking out of the political debate, by giving the leader of the democratic party, leader of the republican party together to agree that they're going to try to fix this problem. tip o'neill and ronald reagan, and we fixed that problem.

now, we need something like that today. i of course come to you with a bit of bias in terms of how we might fix the problem, because i was ronald reagan's treasury secretary for four years, and my views, strongly held view is not that americans pay too few taxes, but that our government spends too much. and i think that that view is incorporated pretty well both in simpson-bowles and in the domenici-rivlin proposal. but one thing i do know is that that bipartisan broad agreement, someone mentioned earlier a grand bargain if you will, will be necessary if we're going to able to stabilize our debt. we cannot continue to move

forward with the debt to gdp of over 100% for as far as the eye can see. and a grand bargain of course will require something that is badly, and many of your participants have said, it's going to require something that's become a dirty word up there at in disneyland on the potomac, and that is compromised. i'm not going, i won't go into the domestic consequences that i think would be associated if we just continue on our current path, except to say that i think they would be catastrophic. instead, let me as a former secretary and secretary of state, if i could focus on international aspects of this debt problem before mentioning for you a few of the elements that i think should be part of any grand bargain. right now, of course, we enjoying -- we are enjoying a period of really low interest rates and, therefore, we have

manageable debt service. this isn't going to continue indefinitely. everybody knows that. i hope everybody agrees with that. i think most people do. in a real sense this debt problem of ours is a ticking time bomb, because as the world economy recovers, as the u.s. economy recovers, interest rates are going to rise. lenders, many of them foreign, are going to begin exacting a premium for lending to a government with total federal debt at over 100% of gdp for as far as the eye can see, as i have said earlier. what's happening to europe today i think is a cautionary example. because when you sovereign debt crisis hits, it can strike overnight. when it hits the united states, what will happen? well, the fed will probably respond by either raising interest rates and/or monetizing the debt. and that's going to create the groundwork for period of low

growth, high inflation and a plunging dollar. now, if that happens, and it's not just possible in my view if we don't take, make policy changes, such a state of affairs could imperil a traditional role of the u.s. dollar as the world's reserve currency. that will increase instability and international markets. it would dampen global growth, and they would constrain of course the ability of our government to pursue an independent monetary and fiscal policy. more generally i think our fiscal crisis, our debt crisis if you want to call it that, runs the risk of undermining our leadership abroad. there will be increasing and, frankly, understandable cause for us to reduce our expenditure on defense and diplomacy. that will constrain our ability to respond to a world where both threats and opportunities abound as we indeed see as result of

the tragic events overnight in libya and egypt. and the final analysis, our strength abroad depends upon our economic health at home. you can't be strong, politically, diplomatically and militarily if you're not strong economically. and this fiscal crisis that we are facing, this big ticking debt bomb threatens both. so you say to yourself, okay, what should a grand bargain look like. and i realize we're not here to draft legislation are right agreements, but let me so just to you if i might based on my experience with tax reform and with that social security compromise, a couple broad principles. number one, we have to start by recognizing that any plan should be realistic. the idea, for instance, that we're going to solve our huge

debt problem by simply raising taxes on the rich is of course a total fantasy. a so-called buffett tax is projected to raise less than $50 billion over 10 years. that's a fraction of 1% of total expenditures over the period. secondly, someone said this earlier, any plan should strike a pro-growth balance. i think maybe it was you, pete. a pro-growth balance between revenue increases and spending. the simpson-bowles plan with a ratio of expenditure cuts to revenue increases of roughly three to one would be a great starting point, as far as i'm concerned. my own preference might be for a plan more weighted towards cuts but that's a matter to be discussed, to be negotiated and to be compromised. third, any plan should include, as far as i am concerned at least, up front expenditure cuts.

they really should not be tax increases done, agree to, accomplished until the spending cuts have already been made, or at least have been legislated. now i'm cognizant of the importance of avoiding further fiscal contraction during a period of weak economic performance, but nevertheless i think if you're going to get into the negotiation for a grand bargain, there really needs to be a substantial down payment in terms of spending cuts. if you don't have that, we will once again run the risk of raising taxes while differing a tough decisions on spending, and we will never see the agreed upon spending cuts. that's happened once or twice before. fourth, any plan should have a spending cap that establishes strict spending targets. our current high government spending to gdp ratio of 24%,

admittedly, is at least in part due to the economic downturn. but still we need a spending cap to bring this number down to a sustainable level as the economy recovers. simpson-bowles suggest a medium-term goal of 21%. fine, that's a good starting point for discussion. negotiate it, compromise a. i would personally prefer a lower number that it's a good place to start. number five, any plan should include an enforcement mechanism. i do not it was a minute ago talked about enforcement, how important it is. i think maven bill brock, to guarantee that the spending cap is met and maintained. unique debt because because if you don't have it, a strong enforcement mechanism, if you don't have that, a future congress can and will simply disregard the provisions of any bargain. this is particularly to i think when it comes to spending,

because there are always good reasons, it economic, it's darn good political reasons to spend more money. at the most important effective measure, i've long supported an end to the constitution but one with an overall limitation on the ratio of taxes to gdp. given political realities today, though ladies and gentlemen, my views are probably going to have to be satisfied if we can get with a legislative approach. something approaching, for instance, the lives, something along the lines of a beefed up grant rudman hollings provision. that would mandate automatic sequestration, should we exceed our spending target caps, and that would mandate sunset provision, terminating tax increases included as a part of the grand bargain, to fall total

federal spending exceeded target percentage of gdp. that way it seems to me you're taking care of both sides of the equation. furthermore, i think that such a enforcement mechanism might feature supermajority requirements in both houses of congress to repeal or change any elements of the grand bargain. and lastly let me say any effort to raise revenue as a part of the grand bargain should focus on broadening the tax base rather than raising marginal rates. somebody mentioned the large number of expenditure provisions, deductions, loopholes and so forth in the current tax code. comprehensive tax reform may be a bridge too far in today's current political environment. because as someone earlier said on the panel, i remember the difficulties we faced in

achieving bipartisan support for even a revenue neutral tax reform exercise in 1986. but if our objective is to reduce our ratio of debt to gdp, and i think it has to be one of our objectives, and if our objective is to restore growth to our economy, any revenue we raise would best be raised by closing loopholes rather than increasing marginal rates. ..

>> all of that said, i think it is critical as many of you have, many of the panel have already said this morning, really critical that americans of goodwill, republicans, democrats, independents alike do everything we can to press our elected officials to make the come propoises -- compromises, however painful, that are necessary if we are to set our country on a sustainable fiscal path. the alternative, which is permanent political gridlock, a lower standard of living for our citizen, and a much-diminished place for the united states in the international arena, is simply unb acceptable. i liked what i just heard a minute act, i think from dennis johnston, who said maybe it'd be good if we could get our elected

officials to take a pledge to try and achieve a grand bargain to try to get out of this trap. but whatever we do, we need to make a heroic effort. this is about the future of our country, it's about the future of our children and grandchildren. to be successful, we're going to have to keep our eye, our eyes on the prize, and that prize, of course, is a future in which our country prospers, our citizens can flourish, and we can protect our interests abroad. thank you very much. [applause] >> thank you, jim. thank you, jim. and if you will wait, you'll finish now. we'll go next to mr. rubin, and then we'll come back to you if that's consistent with your understanding. thank you. we have over ear on your left, my right, another very distinguished american citizen who's come to join us and share

his wisdom with us. robert e. rubin is the chairman of the council on foreign relations, former secretary of the united states treasury. he joined the clinton administration in 1993 serving in the white house as an assistant to the president for economic policy and the first director of the national economic council. he served as our nation's 70th secretary of the treasury from '95-'99 and from '99-2009 he served as a member to have the board of directors of citicorp and the senior adviser to that company. from that point on, he has served in various community organizations and has lent of his time to those who need his talent. we are privileged here to have a distinguished american take of his time and share with us on this issue which we believe is so important to our country and its future. thank you for joining us and

thanks for testifying before us. we appreciate your presence. >> i had one word. i think bob was secretary of the treasurer the last time we were trying to figure out what to do with the surpluses, is that correct? [laughter] >> yeah, that is true. we decided the surpluses were too big, so we would get rid of them. >> we're glad to have you. >> he knows budgets, because he is the one secretary who has led an executive branch into four consecutive balanced budgets. tsa pretty heroic. that's pretty heroic. >> thank you, pete, thank you, sam. i do have a set of comments i'd like to make, and it's a subject just as with jim identify given a -- i've given a great deal of thought to. let me make one comment i didn't plan to make. i think all of us think we should have a pro-growth economic policy, and i at least think jim is exactly right, that needs to be resolved through

compromise. i would just remind all of us that in 1993 we put in place a deficit reduction program that raised rates on the most affluent that was 50% spending cuts and 50% revenue increases, and that created the longest economic expansion in american history. so it is worth sort of keeping all of these kinds of historical moments in mind as we think about what we ought to do. i believe and have believed for a long time that our country is at a historical crossroads. we have enormous strengths; the rule of law, vast natural resources and a great deal else, and i believe that even a transforming global economy we should succeed over the longer run. however, if we're going to realize that potential, i think we have to meet three great challenges. first, we have to address an unsustainable and, i believe, deeply dangerous fiscal trajectory. secondly, we need robust public

investment in areas that are critical to economic growth; education, infrastructure, basic research and so much else. and thirdly, we need reform in areas that, again, are very important to our economy, k-12 education, immigration and much else. i believe that the most fundamental challenge -- and i believe it will be ultimately ruinous if unmet -- is our fiscal trajectory. it poses multiple risks, some of which are already materializing. first, coulding out private investment and creating an interest rate structure that is inconsistent with growth. secondly, severe destabilization, and this is the most dangerous, severe destabilization of our bond markets, our currency markets and our economy. three, undermanning our financial -- undermining our

financial resistance to deal with economic difficulties or, as jim said, geopolitical difficulties. fourth, dampening business confidence by heightening uncertainty about future economic conditions. and heightening concern about whether or not our political system can work. and fifth, containing our capacity for public investment and for national security. severe destabilizations take many forms including a long period of high interest rates, lagging confidence and as a consequence of all that, low growth and probably increased cyclicality. number two, high and spiraling inflation at some point if we try to monetize our way out of our debt. number three, severe crisis in our bond and currency markets that will inevitably lead, and i think very quickly, to deep recession. and number four, some she went

cial -- sequential combination of these consequences. the longer we wait to act preventively, the deeper the whole becomes, the harder to regain confidence, and the harsher and more protracted responding measures will have to be. and if we don't act preventively and are forced to act in response to crisis, the measures required will be far more extreme. i do believe that to allow more time for recovery it would probably almost surely make sense to enact a program now but defer implementation for a limited period with an effective enforcement mechanism. i also believe that fess call reform -- fiscal reform should be done in one comprehensive program. otherwise we lose trade-off opportunities, and i think there's a real risk that the easier measures would be done first and the more difficult measures deferred ip definitely. -- indefinitely.

elected officials and journalists often will say privately that they think our system is incapable of acting on these issues without a crisis. but i believe that that view vastly underestimates how severe such a crisis might be and how harsh the responding measures may be required. the substantive issues in resolving our fiscal situation are, obviously, difficult. but i believe it's reso far bl. resolvable. a highly sophisticated economist said to me not long ago that if he and a pragmatic liberal economist got together, they could put together the pieces of an effective fiscal program in a day. democratic government is often messy, somebody quoted winston churchill a bit ago. but at the end of the day, and i think this is absolutely critical, there must be an

overriding commitment to govern and to do what is necessary. that means basing decisions on facts and analysis, not on ideology and politics or differing opinions, that means making politically tough choices and very, very importantly as jim said, it means working across party lines and differing opinions to reach common ground. our nation's founding fathers strongly disagreed on many fundamental issues, but they worked together through a sweltering summer in philadelphia with delegates often yielding substantially on matters they cared deeply about to form our constitution. the process of reform, whatever will be involved, similarly impassioned debate. but as with our founding fathers, the process must wind up with a principled and effective compromise based on political realities and on substantive trade-offs. in that context, let me expand on two issues both of which have

already been commented on at some length, tax expenditures and spending cuts. many proposals either eliminate or limit tax expenditures substantially. sometimes without specifying the particulars, and in any event, without the discussion and the recognition of substantive effects and political realities that i believe should be done in an area that is newly focused on with such great intensity. i also believe that the effects of tax expenditure cuts or limitations are almost surely not well understood by those that would be affected and probably not well understood by post non-expert advocates. tax expenditure proposals may seem like a politically attractive alternative to the

longstanding debates about spending cuts, interest -- income tax rate increases, imposing -- [inaudible] tax measures and the like. however, in my view the tough choices in many ways have just been postponed. these measures may well be politically undoable or, if adopted, then abandoned or evaded unless the substantive effects and the political realities are fully raid out and fully -- fully laid out and fully understood. tax expenditure reductions are used in many plans as a path toward both reducing tax rates and contributing revenue to deficit reduction. that is an appealing prospect, but it is truly a tall order. tax reductions or, rather, tax expenditure reductions can contribute to a fiscal plan, and i think it was a very useful approach in the number of plans

that have been put forth. but they are not a silver bullet, and realistic savings may be far less than many plans anticipate. in this regard, the nonpartisan congressional research service said, and i quote: given the barriers to eliminating or reducing most tax expenditures, it may prove difficult to gain more than $100 to $150 billion in additional tax revenues. this per annum number is far less than is required in many of the proposals that have been put forward. tax expenditure advocates argue, and i think absolutely correctly, that all choices are politically difficult and then go on to say that substantially more may be doable relative to other possibilities than the congressional research numbers suggest. i think that judgment can only

be made when all tax expenditures are set out with great spes fission key with respect to -- specificity to which they will be, how much they will cost and then provide a clear basis for understanding the substantive effects and the political realities. as to spending cuts, plans generally tend to be broad and not specific either in large measure or at least with respect to some areas. and most plans have spending reduction numbers that at least some analysts say would be hugely injurious o in their substantive effects and may well be politically unrealistic. as with tax expenditures, only analysis of the specifics can provide the basis for an informed judgment and informed decision making, though i would say that for spending because the numbers of pieces in the budget on the spending side are so large which you probably

need, are representative examples. my next point is controversial, but i believe that the numbers clearly show -- and i think that most mainstream analysts would agree -- it is impossible to meet our fiscal objectives and to provide the governmental services expected by the predominance of americans across the philosophical spectrum unless we act on all fronts. these fronts are serious cost containment in the so-called nondefense discretionary budget, entitlement reform to put health care programs and social security on a sound financial footing, reductions in defense and a significant increase in revenues. those who reject the need for revenue increases or entitlement reform, it seems to me, take on the obligation to show the full

specifics of an alternative whose substantive effects are fully understood and that is politically doable. every budget reflects views as to the fundamental objectives of public policy. mine would be growth, competitiveness, increased living standards and reduced inequality and a financially-sustainable social safety net consistent with our valuesment -- values. my preferred fiscal program would be roughly ten years of deficit reduction which, as others have said, leads to stabilizing debt to gdp ratio. i would enact that now, as i said earlier, but defer implementation probably for two years, but with an enforcement mechanism that was real. >> mr. rubin -- >> yes. >> would you go back about 30 seconds and repeat what you said? >> i'll be flighted to -- deligd

to do it. which piece? >> [inaudible] >> sure. >> i think he's talking about the fact probably those who deny you need any more revenue, those who deny you need -- >> i wanted you to repeat the last minute. >> absolutely, pete, i'd be delighted. i think, yes. as we all know, there are many in one party who think we shouldn't increase revenues, and there are many in the other party who think we shouldn't reform entitlements. i think both are absolutely necessary if we're going to get the kind of fiscal program we need, so i believe those who reject the need for revenue increases and those who reject the need for entitlement reform have the obligation to show the full specifics of an alternative whose sub substantive effects ae pulley understood and -- fully understood and is politically doable. >> thank you very much. we're going to have a charge pertinent to that point in our next forum.

>> look, i think it lies in many ways between the heart of the two parties. i do believe -- i want to go back to the preferred -- i would have, i think we need room for critical public investment, and i would have -- i know none of the pros have this -- a 50/50 split between revenue increases and spending cuts. and i would go back to the top rates of the 1990s which were predicted at the time to be ruinous to the economy and instead what we had was the longest economic expansion in the american history with immense job creation. obviously, many would disagree with my view. but it seems to me that individual views are not the point. the imperative is for elected officials and all of us to work together in the spirit of our founding fathers to move to a sound fiscal regime. for later decades, as we all know, health care entitlements are increasingly central to our fiscal position, and their growth comes primarily from the

rising costs in our overall health care system. and i believe everyone agrees that more must be done to address those increasing costs. a sound fiscal regime -- and this is my last, or second to last, rather, substantive point -- a sound fiscal regime is also highly germane to reducing the current economic duress which is creating such hardship for so many americans. there is an ongoing debate about whether the immediate emphasis should be on jobs and growth or deficit reduction. i believe that is a false choice. our fiscal outlook undermines business confidence and economic confidence, as i said earlier, both because it creates heightened uncertainty about future economic and policy decisions, and it height pes greatly the already-considerable concern about whether our political system can work. i don't think we will have a healthy, ongoing recovery until our fiscal underpinnings are in

order, and i do believe that stimulus, if we were to have it, would be far more effective if combined with a serious deficit reduction program and the confidence that would bring. let me wind up by saying that the so-called fiscal cliff with its expiring tax cuts, she quester and the distance from the next election creates an extraordinary set of conditions for producing compromise across party lines and differing opinions to meet our fiscal imperative. this is an opportunity that i believe all of us if government and out of government must do everything in our power not to lose. thank you very much. [applause] >> great. thank you, bob, and thank you, jim. if we could put jim's shining countenance back up. jim -- >> hi, jim. >> jim, hope you were able to

hear bob and so forth, but i'm just going to ask one question because we've got about 24 minutes, i want to make sure everybody has a chance for the questions. and that is america, you can express it a lot of different ways, the dog with the less fleas or whatever, but the world's an economically fragile place, and the bond markets have a lot to do with the discipline in europe, and we're seeing that before our very eyes. do either of you want to venture how much time we have, is this an urgent matter? do we have an unlimited amount of time or a lot of time before america starts being a place that people don't want to lend to? and, of course, we'll have a chart later that shows that, i think, about 20% of our foreign debt's held by china now, 20% by japan, in that neighborhood. so it's staggering as to what is happening out there with our debt. but do either one of you, would both of you perhaps comment on the global implications give the fragile global economy?

>> well, i don't know how much time we have, sam, and i don't know anybody that would know how much time we have. all i can say to you is, and i would suspect that bob might agree with this, that a sovereign debt crisis can hit pretty quickly. fiscal crisis can come along pretty quickly. look what happened in 2008 right here in this country and in the world economy for that matter. and the longer we go on like this, the greater risk we take. that something truly adverse will happen. that's why i agree with what bob said, we're approaching an opportunity, a time of opportunity here to maybe sit down in the aftermath of our presidential election and with another four years before the next one. i'm not suggesting we can get this done in a lame duck session of congress, but it's an appropriate time for us to wake up to the fact that this is,

that this crisis we're in right now, this fiscal shape we're in could easily morph into a sovereign debt crisis or a crisis not unlike what happened in 2008. so the time to act is now, and i agree also with what bob had to say about everything ought to be on the table, absolutely everything. and the only way we're going to get there is through good leadership and good faith and the ability to sit down and negotiate out the problem between the parties. >> thanks, jim. bob, do you want to comment on that, and then i'll turn it to pete. >> listening to jim, i wish that he was leading the nation's efforts, because i think that's a very sensible comment. i'd just make two comments if i may, sam. the bond market, i used to run trading operations for a long, long time, it's kind of a world i've been in. the bond markets today i think are being very much affected by

the european crisis. money's coming here as a safe haven, second, there's little investment demand in the united states. look what happened in europe, sam. greek bonds were trading almost at no spread to german bonds until all of a sudden everything blew up. to jim's point, things can happen dramatically, suddenly and with enormous magnitude. and there's no way to predict it. somebody said the other day markets do what they're doing until they don't, and, boy, that can change very, very quickly. we have time now to do this which europe does not have. we have time right now to do this in a careful, thoughtful, phased kind of a way, but we're giving up that time the longer we wait. and as to when it'll happen exactly, i don't know. obviously, the odds are greater that it will happen in a little bit further out than they are right now, and those odds get greater and greater as time goes on, but i think it is virtually inconceivable that we will not have a far harsher crisis than almost imagines unless we fix

that problem, and the longer we wait, the harder. conversely, by doing it now it gives us more time to do it in a phased fashion with thoughtful decisions. this really would be a tragedy if we give up this opportunity. >> pete? >> i'll take one and then we'll have time for the rest -- >> right. >> let me ask, let me ask both of you, do you have any advice for us on how we can better make the american people aware of what we've got on our hands and what we should do about it? in it appears to me that -- it appears to me that, you know, americans while they see some things that they're very worried about, this unemployment which seems to be something that is sticking and heretofore able to go away quicker, they see that, but -- and they're worried.

inherently, americans are worried about something going wrong. but we can't wait until the cliff, we fall off the cliff to solve the problem. that's why we're doing this. we could wait for the cliff and have one of these meetings, and everything would have gone to heck in america, and we could have big meetings to put it together. but you're telling us put it together now. can you use some additional words to tell the american people how bad it could be? they don't seem to appreciate, i don't think, how bad it could be. do you think you could share something with us? how about you, robert? mr. rubin? >> why don't we start with jim as our senior eminence. [laughter] not by age, by wisdom. >> i don't think you can do much more, pete, than what you're trying to do, what everybody involved in this, in this event is trying to do, and that is generate attention to the problem and point out the importance of it and the direness of it.

i mean, that's what we have to do. i made a comment that was a little bit pessimistic when i was talking to you during my time there when i said that if i -- i said i think if we continue with divided government, it's going to be damn hard to get to a grand bargain. that's what i happen to believe as someone who's had a fair amount of political experience up there. i wish that were not the case. but if it does happen, then i think we need to do, all of us need to do everything we can to focus the attention of the american people on the importance of whoever doesn't want to get, come to the table, focus attention on the importance of encouraging, prodding, promoting, cajoling that group to come to the table. that's, that's all i know to say to answer your question. >> thank you very much.

>> but it's a, this is an extraordinarily serious problem. i mean, if i was advising the president of the united states, the new president of the united states whether it's the same one we've got now or a different individual, i'd say, you know, you've got, you've got three huge problems in this country that you need to address. the economy, the economy and the economy. and particularly our ticking debt bomb. time bomb. that's just -- we've got to deal with it. and i think all we can do is the kind of thing we're doing right now, and those of us who have access to the people who will be the decision makers in the next government can do whatever we can to try and promote that immediate with them. that's all i know to say, pete. >> bob, do you want to add to that? >> i think the only thing i'd add, sam, and basically in agreement with jim, i think after this election -- and i

think you all can play a role in it. i know there's an effort in the business community to raise, to put in place a very large effort to try to persuade those in public office to come together and compromise. i think after this election anyone in our -- every one of us who has some ability to relate to the political system ought to make, they really ought to have only two priorities. one, compromise, work with each other, govern effectively and, two, solve this fiscal problem. and i think that you've got it exactly right. i think the american public needs to be better educated about this issue, and i think the people who can best do it are our elected officials because they can break through most easily, although i think groups like csis can do their share. and i think that all of us should try to persuade our elected officials that's what they should do their pull --

bully pulpits for. >> thank you, bob. we'll start with bill brock. an outstanding member of the senate, served with him when i first got there, and he was one of the leaders with ed muskie in creating the budget committee. if you think it's bad now, back then we didn't even have a budget. >> when we got one, it got worse. [laughter] i'm not sure anybody in this panel or in this room would argue the point that we need to get this grand bargain. i think the component parts are where the challenge is. and i do have one specific question in that regard. bob rubin, you talked about the difficulty in dealing with what i call subsidies in the tax system, loopholes, tax expenditures, whatever you want to call them. most of the conversation has been on removing those tax expenditures on the personal

side. i want to talk about the corporate side because it does seem to me that maybe we have a better shot of reforming the corporate side. everybody, president and everybody else, is talking about reducing the corporate rate. i don't know how you do that without getting rid of some of these subsidies in the tax code for corporations. seems to me that's a good place to start anyway. >> bill, i agree with that. i agree with that, and i do think you could base broaden and lower the rate, but if that's going to be deficit neutral which seems to be generally how this is being approached on the corporate side, and i think we should do that, if it's deficit newtal, it's not contributing to deal with our fiscal problem. >> i don't care if it's deficit neutral as long as it removes the deficiencies -- >> no, no, that's fine, i totally agree with you. the trouble is it doesn't do anything to address the issue that we're convened here today to discuss, is the problem. >> okay. bill frenzel?

>> gentlemen, thanks for your testimony. it's been wonderful, and i don't want todiminish its effect by asking any questions. thank you. [laughter] >> the first time i've ever heard a member of congress -- >> sitting members or from former members. >> bill, you've made history this morning. >> is that the bill frenzel i know? [laughter] >> dan? >> with i'm not from the frenzel school, so i'll ask a question. you know, it just seems to me jim baker talks about divided government, bob rubin talks about the divisive system and whether we're capable of doing it. you know, the problems are not rocket science to solve. this is not like finding a cure for cancer that is extremely complicated. we kind of all know what to do. the question is, will our political system evolve to the point that will allow us to make these difficult, tough decisions? you both have been leaders in

the private sector and the public sector, you know what leadership requires to get things done, you know? and what teamwork requires. and i guess my question to you and maybe it's self-evident and you've already talked about it is what are the incentives for leaders to act like leaders? when we have a very risk-averse political system? you've presented the problems as serious and catastrophic if we don't do anything about 'em, so that's what leadership is for. and so, you know, i would say to you if you were advising the next president of the united states and you've kind of alluded to this, jim, because i think the president has to really take the lead on this and set the direction as most ceos do. what do we do to get leaders to act and operate in this environment in an affirmative, assertive way? >> well, i think i may have said it, dan. you have to simply continue to

ham haar home -- hammer home the potential consequences of inaction. and they're catastrophic. and i don't think, you know, my sense is that regardless of how our election alternatives out for -- turns out for president, the new chief executive is going to want to find a way if he can to deal with this problem. i'm pessimistic only if we continue to have divided government. if we don't have that, i think we have a real opportunity. to lead and to get something done. and i would hope we would have it even if we have divided government. but i suppose that remains to be seen. >> three quick points, if i may. >> sure, bob with. >> one, i do think the next president -- if this problem isn't solved, i think the president is going to have four

fallow years because this will undermine anything he wants to do, so tremendous sniff to provide leadership in getting this done. number two, a friend of mine who was in the senate for many, many years, very distinguished former senator said that when he was here many years ago, it was always very partisan, but at the end of the day, most senators had a commitment to govern, and they got together, and on most issues they were able to move forward. somehow that's got to be established what the incentives are, maybe it's just looking in the mirror and deciding i'm here in the final analysis. and thirdly, and i think jim alluded to this -- far more expert than i would be -- if enough public pressure can be created, it may change the political calculus of those in office to feel they better compromise, otherwise they may not be in office that much longer. >> thank you, jim. bob -- >> one of your speakers, one of your speakers -- >> senator johnston, louisiana? >> excuse me, jim. >> yeah. >> i was just going the say,

sam, that one of your speakers earlier, i think a former congressman maybe from tennessee, referred to the supreme court decision in baker v. carr and talked about how the redistricting process we have in this country is exacerbating the problems of our political dysfunction. because our campaigns now revolve around the primaries and not the general election. we don't have many truly competitive seats anymore. and now, but you can't deal with, you know, people say what can we do to correct it, well, you can't deal with that without a constitutional amendment which is, of course, extraordinarily tough to get. >> bennett johnston, louisiana? >> if it is a disaster to go over the fiscal cliff, which i think we're agreed that it is, and if there's not time to deal with the grand bargain in the

lame duck, then the question is, what do we do in the lame duck? that's the emergency now. do you agree with me that we can accomplish two things; first, get a goal as to deficit reduction, $4 trillion is what simpson-bowles has over nine or ten years, and secondly, get a matrix, a procedure by which the congress would act next year with mile posts so if they do not act, for example, on reconciliation instructions by a certain date, then certain things happen? do you agree with that, and if you don't, what would be the alternative? because i think we need to focus on that lame duck session. >> thank you, bennett. tim roemer -- >> [inaudible] >> can i answer the question? >> all right, sure. jim, then bob. >> yeah?

well, what i think -- let me tell you what i think's going to happen, bennett. i think there'll be a much greater focus on this problem right after the election. there won't be time during the lame duck to get anything substantively done about it, but there'll be a recognition that we have to move the cliff out and then so that we have time to deal with it and deal with it in an effective and orderly way, and i think that's what's going to happen. >> bob? >> yeah, jim, i totally -- i've given a lot of thought on that, i even wrote an op-ed for "the wall street journal" not too long ago. i agree with jim. first of all, you all know far more about legislative process than i do, but one approach would be to defer the year end for a couple of months so instead of having lame duck, you have a lame duck in a couple months. you still have the pressure of the fiscal cliff, and nobody's giving up any -- it's like

continuing resolution, just deferring it for two months. i sort of, i'm not so sure we won't go over the fiscal cliff briefly because it may be that for all kinds of reasons one party decides that's the way to negotiate. but if we go, we cant stay over very long, that's for sure. and thirdly, i think the idea of doing something general and then deferring its completion gets to be troubling to me because i think -- again, you know far more on legislation than i do. you get sick months down the road, eight months down the road, we get nearer the next election, and i have a feeling that congress in its infinite wisdom would be inclined to postpone things indefinitely, so you've got to put in place something that can't be 30,000 feet in the air, it's got to have specificity to it, and i think one should consider -- not sure it's the right idea, well,

i kind of think it's not a bad idea -- defer to the end of the year for a couple of months. >> tim roemer? >> that's what'll happen. >> yeah, thank you, senator. to both jim and to bob, you have really outlined very eloquently and articulately your economic credentials and, you know, your expertise here. what are you more worried about right now, the economic fundamentals or parts of the political disfunction up on capitol hill? and to the political dysfunction and gridlock, how do we talk about the answers to the fiscal cliff and to the deficit in p optimistic and positive ways? job growth, economic competitiveness, things that will get the legislators' attention, that will be rewarding to them and hopefully

increase the cascade of both pressure, but also opportunity and optimism for them?ok >> jim? >> that's going to be part of the debate. [laughter] it seems to me, tim. i mean, in my remarks i outlined for you my view on -- you know, bob and i are probably dis-- will probably disagree on some of these issues. in fact, we do, and we've had discussions about it before. my view is you need to, you need to put in place pro-growth economic policies in that reducing marginal tax rates, the most pro-growth economic policy you can come with. now, bob probably might not agree with that, but i think we just keep making that case. you asked first of all what we

worry about most the economic or the political, i worry about the political dysfunction right now. if we could cure the political dysfunction, we can solve the economic problems through the mechanism of a grand bargain that has everything on the table. nothing excluded. >> bob? >> this is not going to be an exact quote, but it's a fairly rough, it's a fairly decent paraphrase. president clinton used to say if you can't solve the politics, you'll never get good policy, so i agree. i think the political system disfunction is our ultimate challenge and our fundamental problem. i think, tim, you can express all of this in the way that both of us have. i am deeply troubled by this. i really do think we are heading -- forget the fiscal cliff, i think we are -- i mean, that's sort of a by-product. i think we're heading into a virtually certain crisis, as i said, of tremendous import at some unpredictable moment. but you can turn that around and say that if we do the right things, we can be, we can get

the benefit of increased confidence now, i at least threw the stimulus in but you can argue that both ways, increased confidence now, and that would help improve our economic position i think significantly, and we can build on our enormous long-term strength so that we can be successful in this transforming global economy. so i think we take all the negatives, and then you can turn them around and express them in positives. by the way, oh, i already said this, i do agree with jim that the ultimate challenge to is our political system. >> bob, to add to that, if we can get a virtuous circle going of fiscal responsibility and growth, we've been given a mulligan in terms of energy. subject for another day, but the break we're getting with the abundance of natural gas can make america one of the most competitive industrial nations in the world. we have that opportunity. so there's some really good things that could happen, but this problem has to be dealt

with first. i want to, again -- jim, thank you for you and for being here. i know you have a very busy schedule. bob, thank you. i know that both of you are enormously busy. we deeply appreciate it. jim, thank all the folks at the baker institute for joining in as a cosponsor of this series of forums. again, i want to thank concord coalition, csis, bipartisan policy center, american business conference, the baker institute, the bellford center at harvard and also again, rudy pinner and those who individually have made this effort possible. we thank all of you for being here. pete, last word? >> thank you very much. and i just thank everyone as you did and want to say that this is a terrific start. perhaps we're going to find some -- this turned into a rainbow where we'll find some beautiful light. at least i hope so. and i want to say that i believe the problem can be solved.

i'm going to throw out a word that was invented by me in the budget act called reconciliation, and i believe what we're talking about is the possibility that someone will find a way to bridge this gap with a bill that will get us, give us the time to do the work that the bill requires at some future date doable. that's doable. i hope that's the case. thank you very much. great to be with you and to be cochairing with you. >> thank you very much. the clock's run out. thank you. [applause] ..

hosted by the family research council. this is expected to be an all day event. there will be a break from 2:00 -- 12:00 to 2:00 eastern. among the speakers this morning republican vice presidential candidate and wisconsin congressman's rand paul and also eric cantor and south carolina senator jim demint. this afternoon virginia governor bob mcdonnell representative allen west of florida and steve king of iowa. we will also hear from minnesota congressman michele bachmann and of course family research council president tony perkins who was the luncheon speaker at the national press club earlier this week. you can see what he had to say if you go to the video library at c-span.org.

according to "the washington post" neither mitt romney nor missouri candidate ted akin are scheduled to speak at this event. is expected to get underway in just a moment. ♪ ♪ ♪ ♪ ♪ ♪ ♪ >> good morning ladies and gentlemen.

we will begin in just a couple of moments. please take your seats. ♪ and. ♪ ♪ ♪ ♪ ♪ ♪ >> good morning ladies and

gentlemen and welcome to the 7th annual al use voter summit. to kick off our meeting this morning please welcome to the stage or master of ceremonies, mr. dale burden. [applause] >> good morning everybody. we are looking forward to what i know will be one of the best we can hear the 7th annual values voter summit. well it's 2012, finally. [applause] i didn't think we would ever get here. i don't know about you but i'm ready for a national do over. does anybody want to join me? [applause] you are going to be hearing all about that over the next couple of days and before we get

started i just have a couple of quick housekeeping items i need to go over with you about. first of all no unauthorized taping a recording of the values voter summit. violators will be forced to serve on the president's counsel on jobs and competitiveness. you laugh, but trust me that is the loneliest job in washington d.c.. seriously you can view all of the sessions on the summits web site after the event. we appreciate so much are understanding with our enhanced security. as most of you know we had more than our share of excitement at the family research council recently and so all bags are subject to search if deemed necessary by our security team and of course that is a required to all sessions and maybe some consolation to you that we are all miserable. please no campaign signs or the distribution of campaign literature during the summit and this especially goes for all of

you dennis kucinich followers. the guy is not even in the race so behave yourselves. folks we are very pleased to have all of the media here as our guest. please be respectful as they cover the event and i will also add would you please resist the temptation to conduct your own media interview? we would like to summit to be the story this year and so we would appreciate your cooperation in that. and from time to time there will be live interviews right here on the floor. trust me, it won't be very long and if someone is doing an interview at as close to you please be gracious and allow them to do their job as we are very glad they are here to cover the values voter summit. finally you can read all of the impressive bios of all of our speakers in your programs which we encourage you to read as we briefly give an introduction of each one. also keep in mind that our schedule is very fluid and -- fluid so your schedule might be

a little different. for example you read just to hear from the vice presidential candidate paul ryan. he will be speaking this morning but we had to move that around just a little bit so please keep that in mind as we work through the schedule together. alright ladies and gentlemen we are ready to begin the values voter summit and what better way, in fact the only play than in prayer. coming to lead us in our invocation is family research counsel chaplain and national prayer director, reverend pierre bynum. [applause] >> thank you. let's bow our heads in prayer. heavenly father we call ourselves values voters, but lord we are united lord in faith in our lord jesus christ. lord, we are here as believers in you as your people and so we

humble ourselves before you hear that very outset and we pray lord that you will be exalted in this place. pray that you will be exalted in our hearts. we pray you will be exalted among the speakers. we pray lord that you will guide and lead and protect, guard, sharpen our minds and sharpen our souls. lord, equip us. we are here lord not to become ignorant people but to become -- in the things of god in the things that will make us able to love our neighbors. lord god, to help us to be the salt and light and lord we desperately need you and lord we desperately we need need to be equipped in this hour. father, as we gather this day and lord, these two days be with us in a mighty way. send your presence, lord florida filled his place with your presence, stir our hearts and

lord, change us. send us home to make a difference in a few weeks we have before this election. and lord, in the scripture, your word says you have installed your king on mount zion and lord you have urged the king, kiss the son left a parish away. we pray lord that you will help us lord to bring leaders to our nation who will honor you, who will bow their hearts to you and who will lead according to your principles, your will, your word. lord we love you now. be with us, we pray in jesus name. amen. >> amen. >> thank you pierre and now ladies and gentlemen would you please stand for the presentation of our callers brought to us this morning by the boy scouts of america, troop 1115 from a manual bible church

of springville, virginia and remain standing as they lead us in our pledge of allegiance. ♪ ♪ ♪ ♪ >> audience please join me in the pledge of allegiance. i pledge allegiance to the flag of the united states of america, and to the republic for which it stands, one nation, under god, indivisible with liberty and justice for all.

>> please remain standing as we sing our national anthem sung by legendary gospel recording artist, terry blackwood. ♪ ♪ oh say can you see ♪ by the dawn's early light ♪ ♪ what so proudly we hailed ♪ at the twilight's ♪ ♪ last gleaming ♪ whose broad stripes ♪ and bright stars ♪ thro' the perilous fight ♪ ♪ o'er the ramparts we watched ♪ ♪ were so gallantly streaming ♪ and the rocket's red glare ♪

♪ the bombs bursting in air ♪ gave proof thro' the night ♪ ♪ that our flag ♪ was still there ♪ o say does that star-spangled ♪ banner yet wave ♪ o'er the land of the free ♪ and the home of the brave [applause]

♪ ♪ >> thank you ladies and gentlemen. you may be seated. one final thing, let me mention on sunday morning at 9:00 a.m. we will be having a very special church service led by our first speaker this morning. he is the president of -- the research counsel. he will also be serving as our moderator for the values voters summit and will bring our convention to order. ladies and gentlemen please welcome to the podium, tony perkins. [applause]

♪ >> good morning. thank you very much. [applause] thank you very much. it is great to be here this morning and it's certainly a privilege to serve as the chairman of this values voter summit at this convention of conservative value voter delegates from across the country. on behalf of the sponsors of the american family association, american values, family research council, heritage foundation, liberty university and. sponsors international communion of evangelical churches, and the media research center i am pleased to welcome you to the 2012 values voters conference. this year's theme, limited government, reduce spending champion traditional u